Financial Advice

Buy & Own a Car

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Are You Paying Too Much for a New Car?

You diligently took care of your car throughout the pandemic. You have held on as long as you can and now you really need a new set of wheels. Unfortunately, your car shopping comes just as inventories are stretched thin, and prices have increased dramatically. Even in today’s car-buying market, there are some things you can do to help ensure you still get the best possible deal on your car purchase.

Understand the Market Situation

First of all, go into your car shopping with eyes wide open to the market. During the pandemic, automobile assembly plants closed to safeguard workers. The computer chips that would have been used in those cars were diverted to other end users like semiconductor manufacturers.

During the economic uncertainty brought on by the pandemic, many people postponed buying cars. That meant that not only were fewer cars being brought to market, but fewer used cars were being traded in or sold directly to buyers.

The result is that a visit to the new car lot is likely to yield slim pickings, and used car ads are hard to find, too. The forces of supply and demand are alive and well in the car-buying world. Low supply, high demand, increased prices.

Beware of Dealer Upcharges

Though shortages still persist, automobiles are slowly beginning to roll off the assembly line again. Many car dealers, however, are exacerbating the high prices by charging more than the sticker price, a practice frowned upon by manufacturers. Edmunds.com estimates that 82% of new-vehicle purchases in January 2022 were at prices that exceeded the suggested retail price, with buyers paying $728 more on average. A Wall Street Journal article recently reported that some dealers are even requiring buyers to accept added fees and warranty protections as part of the car’s sales price.

When visiting dealerships, come prepared with your research (see below) and ask dealers what if anything they have added to the manufacturer’s suggested retail price. They may not be willing to negotiate those fees off or down, but at least you know what you are paying for and can make an informed decision about whether or not do business with a particular dealership.

Do Your Research

Now is the time to spend the extra time researching and shopping around. Research Edmunds.com and Kelley Bluebook so that you are well-versed in the manufacturer’s suggested retail prices for the cars you are interested in. Looking for a used car? Do your same due diligence. Become familiar with the price ranges for each model by year, mileage, and features.

And you’ll definitely want to expand your search area. You could really benefit from looking beyond your neighborhood dealership. If you are willing to leave the Central Texas area and head out to San Antonio, Houston, or Dallas, you might have more luck finding the right car at the right price.

Have Your Financial House in Order

You’ll be a much more attractive buyer if you go into the process with a strong financial picture. Lenders consider a borrower’s credit score and credit history when evaluating a loan application and determining loan terms. In fact, your credit determines your eligibility, your interest rate, and your payment. Make it your goal to get your credit score to at least 670; for even better interest rates, shoot for a score in the upper 700s.

When you think you’re ready to buy, follow these steps to leverage your credit and get the best deal on your new car:

1. Pull your credit report to see if you have any adverse accounts. Even if you’ve paid your bills on time and don’t have extensive debt, it’s still good to check just to make sure everything is accurate, and you didn’t miss something. If you do find you have any issues, take care of them. You might have to pay off outstanding debt, deal with debt collectors, or even contact the credit reporting agency to correct inaccuracies.

2. Review and calculate your debts. Your credit report will not include your credit score unless you pay for it. However, it will have all of your debts listed and whether you’ve made timely payments.

3. Assess your income and expenses. Do you make enough money to pay off your debts? Are you totally debt free? The answer to these questions is important because your loan officer will see your credit report and may ask you questions about it.

4. The last step is to research the best car that fits into your personal financial situation. It might not be your dream car, but it should be one that lines up with your stage of life and your ability to make the payments.

Choose Your Lender Wisely

We’ve all heard horror stories about haggling with salesmen and spending hours on end at a dealership. But applying for an auto loan need not be painful or stressful. Ask friends and family for recommendations. Look around for the best rates. Consider a locally-owned lender with a good reputation in your community. Now more than ever, having a knowledgeable financing partner on your side is critical. At UFCU, our lenders will help you compare your best car loan options so you can buy with confidence.

Consider Your Options

Often, dealerships will offer you a longer car payment to keep within your desired monthly payment. While this might seem like a better deal because of the lower monthly payments, you will end up paying more in the long run, and you’ll be paying off a car payment for longer. Not only that, but if you get into a wreck or need to sell your car for some reason, you risk owing more on the car than what it’s worth.

Should you go for the longest possible term to get your payments down? Or opt for a shorter-term loan that could save you significant interest expense? Our car-buying experts will help you evaluate your options, as well as the optimum amount to put down on your car, and whether it makes more sense to trade your existing vehicle in to the dealership or sell it direct to a buyer.

Get Preapproved and Take Advantage of eVBCs

Preapproval with UFCU means you’re most likely getting the best interest rate you qualify for. But a UFCU electronic Vehicle Buyer’s Check (eVBC) just might be the quickest, easiest way to buy a car from a dealership. It gives you the ability to pay for your vehicle as a “cash buyer” at your convenience. Many UFCU Members know about, or have already taken advantage of, our traditional paper Vehicle Buyer’s Checks (VBCs). These convenient checks are issued by UFCU directly to our Members, to spend at an auto dealership when they are ready to seal the deal. An eVBC is simply the modernized, electronic version of this process.